(Bloomberg) — Bitcoin’s modest recovery after Friday’s record crypto crash has done little to ease the fallout from over $20 billion purge of leveraged bets that left parts of the market incapacitated. The unprecedented washout erased months of speculative build-up and forced some funds out entirely, traders say.
Open interest in Bitcoin futures dropped to about $70 billion from roughly $94 billion across major exchanges, data compiled by Coinglass show — the steepest single-day fall in more than two years. The sharp contraction underscores how quickly risk can unwind in a market still governed by automatic margin calls and fragmented liquidity.
“The magnitude of this de-leveraging is likely destabilizing. Some funds may have gone belly up and longs got absolutely obliterated across the spectrum,” said Vetle Lunde, head of research at K33. “Incredible amounts of pain in BTC, but very resilient price action given the extreme pressure from liquidations.”
Still, traders have narrowed timelines, with open interest on Bitcoin options contracts expiring in the middle of the month significantly higher than usual. Contracts expiring on Oct. 17 – which have almost $5 billion in notional value – are clustered around puts at the strike price of $108,000 and calls for $125,000 and $120,000, according to crypto derivatives exchange Deribit by Coinbase.
The combined market value of all cryptocurrencies rose more than 6% to top $4 trillion on Monday, according to CoinGecko data. Bitcoin was trading at about $115,000 on Monday afternoon in New York, after sliding below $105,000 on Friday in the US. Smaller tokens also regained some ground, with Ether back to about $4,200 after falling to less than $3,500.
Smaller tokens were hit even harder Friday due to lower liquidation and higher level of speculation with leverage in altcoins dropping by a 91 basis point decline over the weekend, which is the largest plunge ever, according to K33.
Donald Trump’s 100% tariff threat on Chinese imports rattled global markets bloated with speculative excess late Friday. But the pain was most acute in crypto, with an index tracking altcoins — the smaller tokens beyond Bitcoin and Ether that rely on fragile liquidity and speculative zeal – dropping as much as 40% within minutes.
The rebounds coincided with Sunday statements from Trump and Vice President JD Vance signaling openness to a deal with China that eased trade tensions.
Demand for crypto derivatives such as futures and options had soared in recent months as Bitcoin climbed. The largest cryptocurrency reached a record $126,251 last Monday, in part because of the pro-crypto stance of the second Trump administration.
“Relative stability over time has allowed this leverage behemoth to surge, breeding the instability of the weekend,” Lunde said. “Impact has been massive. Leverage was extremely high, and a cascade inevitable. Tariffs turned out to be the catalyst.”
Even so, the overall outlook among crypto traders remains bullish. In the Bitcoin options market, open interest across all expirations is clustered around the $140,000 and $125,000 strike prices for calls.
“If BTC trades as “digital gold” again, this would be a good opportunity to own BTC in the long term,” said Greg Magadini, director of derivatives at Amberdata.
